Franchising concept meaning types. What is franchising and franchise: understand the intricacies, get acquainted with the giants

Perhaps everyone dreams of having their own business. But, unfortunately, not all small entrepreneurs manage to win the competition and take their place under the sun. That is why more and more businessmen prefer this type of activity as franchising.

What is franchising? It means that you will work under the auspices of an already promoted large company. But let's talk about everything in more detail. So...

Franchising - what is it?

Due to the saturation of the market and the high level of competition, not every sane entrepreneur will decide to promote a newly created brand. That is why franchising is becoming more and more popular. Everyone knows what rent is. We are accustomed that this concept refers to property. in this case, we are talking about renting a trademark or brand.

Thus, we can say that franchising is a form of entrepreneurial activity, during which large enterprises (franchisors) transfer to businessmen (franchisees) the right to use a trademark on certain conditions and for a specified amount of remuneration.

All details of cooperation are reflected in the franchise agreement. The main of its points is the amount and procedure for paying royalties. Also, this document may display conditions and some restrictions regarding the use of the brand and trademark. The amount of the initial contribution is also negotiated, which is a prerequisite for starting partnerships.

How did franchising develop?

The development of franchising has a long and rather interesting history. So, the ancestor of this type of activity is considered to be Singer, who, starting from 1851, began to conclude contracts with certain firms, transferring them the right to sell and service their sewing machines.

By 1920, the so-called commodity franchising began to develop in the United States. It consisted in the fact that large manufacturers established the sale of their products through large retail chains. In return, sellers received some privileges in terms of price, as well as the ability to use a well-known brand to attract buyers. By the 1930s, this phenomenon had also spread to oil refineries, leading to the formation of large networks of petrol stations.

Franchising in its modern form was born in 1945. Then the founder of the McDonald's brand bought several successful restaurants and combined them under one brand. The popular network soon spread throughout the world.

When did franchising appear in Russia

Franchising in Russia originated in the 90s, when large entrepreneurs began to cooperate with well-known foreign firms. The pioneer in this issue was the "Planet of Hospitality". Well-known companies for the manufacture of sports uniforms and equipment have become widespread. The first tour operators also came from abroad. In 1997, a decision was made to found the Russian Franchise Association.

The most famous representatives of this line of business are the chains of fast food restaurants "McDonald's", "Subway" and others. Cooperation in terms of the manufacture and sale of clothing and footwear has also become widespread. Unfortunately, crisis moments and fluctuations in the economy contribute to the withdrawal of foreign representatives from the Russian market.

Treaty

The franchise agreement, in accordance with the law, is called a commercial concession agreement. It implies that one party transfers to the other a specific list of rights to use the trademark for commercial purposes. The document can be open-ended or have a specific end date.

The right to use a trademark may provide for unlimited use of the brand or set certain limits. It is also worth noting that the contract prescribes some obligations of the parties. In particular, the user is responsible for maintaining the reputation of the company, as well as using its attributes strictly for their intended purpose.

The parties to the agreement may be legal entities or individual entrepreneurs who are registered in the manner prescribed by law.

Types of franchising

Regarding this form of activity, there are several ways to classify. In accordance with the most common, the following types of franchising are distinguished:

• By field of activity:
  • trade (implies the sale of goods of a certain brand with the possibility of using its marketing system);
  • service (the franchisee transfers full or partial rights to provide services in accordance with a patented methodology);
  • production (the franchisee receives the technology of manufacturing goods for use);
  • mixed.
• According to know-how:
  • distribution (sale of goods or provision of services under a certain brand name);
  • business format (a business methodology is added to the previous paragraph, as well as a marketing concept).
• By organizing the system:
  • direct (direct agreement between the franchisor and the franchisee);
  • development (the right to open outlets on the basis of a franchise agreement strictly within a certain territory);
  • master (implies almost complete transfer of rights and obligations).

Forms

There are the following main forms of franchising:

• direct - implies direct contact of the parties to the contract in determining the key conditions;
• sequential - lies in the fact that the recipient is endowed with a number of additional powers;
• sub-franchising - implies that the franchisee has the right to conclude concession agreements as a copyright holder.

Basic conditions

Franchising is of increasing interest among domestic entrepreneurs. Proposals on this issue are quite numerous and tempting. However, when deciding on such a deal, you must be prepared to fulfill the following conditions:

• you will have to completely submit to the point of view of the franchisor and accept his philosophy regarding doing business;
• from the moment of signing the contract, you will be obliged to strictly comply with all its conditions (therefore, if you have some comments or suggestions, it is better to discuss them before the conclusion of the transaction);
• you will have to be in constant communication with the franchisor, discussing all key issues with him;
• the business management mechanism will be similar to that adopted in the parent company of the franchisor;
• you cannot independently turn rationalization ideas into reality without a long discussion with the franchisor (and there is no guarantee that you will be given the go-ahead to make changes to the production organization).

Franchise Benefits

Many entrepreneurs have already resorted to such a type of activity as franchising. What is the lease of a trademark, in general terms, is clear to everyone. But it is also important to know what benefits you can bring to the conclusion of such a deal. So, franchising is characterized by the following positive aspects:

• when opening your own business, you do not have to work out the mechanisms of management and production, because with the purchase of a franchise you get a well-functioning business system;
• despite the control by the franchisee, you will have a sufficient degree of both legal and economic freedom;
• information about the activities of large firms is often laid out in the public domain, and therefore you have the opportunity to familiarize yourself with the activities of your potential partner even before concluding a deal;
• you are practically not affected by the risks that young enterprises often face, because the parent company is already well known in the market;
• if you choose the right field of activity in accordance with the needs of consumers, then your business will be successful from the very beginning.

Thus, franchising is an ideal option for your own successful business.

Hello, dear readers of the “site”! This article will focus on a franchise (franchising) - what it is, what documents the franchisee receives, what types of franchises there are and what are the advantages and disadvantages of this type of business activity.

After all, this is a good way to start your own business and earn money without having any experience in business. The presented publication is useful to study for absolutely everyone (including beginners and successful entrepreneurs).

About what a franchise is in simple words, what is the purpose of franchising in a business, what types of franchise businesses are - read further in our material

1. What is a franchise and franchising in simple words - definition and meaning of terms

First of all, let's look at what a franchise is in simple terms.

Franchise(from fr. franchise- prerogative, advantage) is the object of a franchise agreement, the transfer of a brand and business model to a partner on favorable terms.

Franchising(franchising) is a business model in which one company transfers to an individual or another company the right to conduct an identical business under its trademark for an appropriate fee.

Thus , franchise is the subject of the transaction franchising- the deal itself. Do not confuse these definitions!

The parties to a franchise transaction are called the franchisor and the franchisee. Franchisor - franchise company franchisee , respectively, is the party acquiring it.

An excellent example is KFC restaurant . All cities have this fast food, but the organizers are local entrepreneurs who have opened a franchise business and make a profit.

2. What is royalty in a franchise + other terms of franchising

Apart from franchises , franchisor And franchisee there are other specific concepts to be aware of. We present them below:

• know-how - information that helps to conduct business, and is known only in this organization. Transferred to the franchisee along with the license.
• License - documented right to conduct any business. Acts as an object of franchising along with the brand and know-how.
• franchise agreement may be called license agreement(in the case of a transfer of intellectual property) or concession agreement. The essence of this does not change.
• The main point of such an agreement is lump sum - payment for the purchase of a trademark or a certain stock of goods. A lump-sum fee is paid each time the contract is renewed.
• In addition to this payment, the franchisor also receives royalty . Franchise royalties - This is a regular periodic fee for using the franchise. It can be paid as a fixed amount or as a percentage of the profit. All this is stipulated in the contract and is the main interest of the franchisor, together with a lump-sum fee.

3. A package of documents that the franchisee receives

The starter kit that the franchisee receives is called franchise package .

This set of documents includes:

• legal documents regulating this type of activity ( licenses, permissions and so on.);
• brand book, according to which the retail space is designed;
• personnel management policy;
• manager's guide.

Besides The franchise package may include various trainings for employees, software, business benefits and much more. All these documents are aimed at ensuring that the franchisee understands the corporate spirit of the company as soon as possible and begins to work in accordance with the standards.

Take note! Franchise companies offer their services online. You can get acquainted with their offers, compare conditions and leave an application on special resources.

In addition to the main franchise, there is also master franchise - the businessman who bought it remains the sole owner in a certain territory (city, region, region). Naturally, the lump sum and royalties will be large, but the income of the entrepreneur is also higher.

At its core, a franchise is one of the varieties.

4. Pros and cons of a franchise business

Like any business activity, a franchise business has pluses (+) And cons (−) .

Positive parties when buying a franchise:

1. Minimum risk. Buying a franchise, a businessman skips the stage of creation and promotion. Before him, this had already been done by the owner. Thus, profits do not have to wait for years. And make a mistake in management, incorrectly assess the market situation almost impossible as the business is regulated by the franchisor.
2. An established brand. Brand recognition is already there, it makes no sense to spend money on advertising.
3. Quick first profit. Since there are no costs associated with opening a new company (such as advertising, rent, etc.), the first profit begins to flow in the first month of operation.
4. Decreased advertising costs. Due to the fact that the company's trademark is already "promoted", the lion's share of the budget is saved. After all, it is well known that advertising costs more than 40 % of profit during the first period of operation of the enterprise.
5. Possibility of training and consultations at the franchisor. The interest in the success of the branch is not only among the franchisees, but also among the owner of the trademark. Therefore, control and timely correction of errors are present at all stages. Support and assistance are guaranteed to help you reach a successful level of work.

Now about the inevitable negative aspects of the concession:

1. Lack of room for franchisees to maneuver. It will not be possible to make independent decisions, because the whole process is regulated by the seller of the brand. To introduce any innovations, they must be agreed with the franchisor.
2. Mandatory payments. Lump sum and royalties, minimum mandatory purchase of goods- for these obligatory payments it is always necessary to adjust the received profit. Whereas a free entrepreneur disposes of the income received at his own discretion.
3. High transaction cost. Famous brands charge a lot for their trademark and business model, especially for a master franchise.
4. Total control by the franchisor. In addition to, perhaps, a free concession, the trademark owner will tightly control the entire business process. For experienced entrepreneurs, this is not very desirable.
5. The impossibility of changing the current model. Even if your marketing kit is more successful and your work strategy is better, you will not be able to implement them. All processes are strictly regulated.

Thus, before concluding a franchise agreement, it is necessary to evaluate all the pros and cons, and decide which prevails. And then start work.

5. The main types of franchises - 7 varieties of doing business

Franchising - this is a business model so popular in the world that several types of franchises have developed that have certain features. Let's talk about each in more detail.

View 1. Free

The most popular type of franchise in Russia. More degree of independence franchisees from the franchisor and relatively small ↓ royalty.

View 2. Classic

The most popular type of franchise involves obtaining lump sum And royalty. The franchisor reserves the right to monitor the case, make its own amendments and check the franchisee for the identity of the business.

Type 3. Import substitution

In the light of economic sanctions and the import substitution program, the problem arose to provide the consumer with products of European quality, but Russian-made.

The object of an import-substituting franchise is purchase of imported technology, and the production itself is carried out on the territory of the Russian Federation.

View 4. Silver

It implies the purchase of a ready-made business that does not require additional investments and “promotion”. The owner of the brand himself opens a division of the company and gives it on a turnkey basis. As royalty here are monthly deductions as a percentage of profit.

View 5. Corporate

It is distinguished by the active participation of the franchisor in the management of the branch. Suitable for beginner businessmen, as they will have the opportunity to learn management.

The possibility of maneuver with this type of franchise is small, but the risk of making a mistake is minimized.

View 6. Business for rent

Leasing out a ready-made business franchisor receives a regular income and spends his free time on more interesting projects. Franchisee he uses a ready-made case, without wasting time on opening it.

In this case, the profit is distributed among the partners in the percentage determined by the agreement ( For example , 50 /50 )

View 7. Golden

Redemption of the monopoly right to conduct business in any region ( master franchise ). It has high ⇑ rates, but it also pays off quickly and brings good profits.

In any case, before investing, you must realistically assess your potential, both financially and morally. Do you have enough ambition and endurance, can you risk a certain amount- you decide!

6. Examples of franchises - 5 most popular

In addition to well-known fast food restaurants such as McDonald's or Subway, there are still attractive companies. Let's dwell on each of them in more detail.

TOP-5 franchise offers in Russia in 2019:

1. "Pyaterochka" - the most popular network of grocery supermarkets. More 5 000 stores operate under this brand in Russia. Known for introducing the concept "reverse franchising", that is, there is no royalty, but there is agent's commission for the sale of goods.
2. 33 Penguins is a chain of ice cream parlors that also sell pastries and desserts. Works on the territory of Russia and the CIS, has 42 own points of sale and 1 700 franchised points. innovation 2016 year was the release of a product line for vegetarians, diabetics and healthy lifestyles.
3. Ascona is the largest manufacturer of mattresses, beds and pillows in Russia and Eastern Europe. 285 franchise outlets, 398 own stores. Owner "Stamps of the Year No. 1" V 2011 And 2013 years.
4. Independent laboratory Invitro is a leader in the provision of services in the field of medical laboratory research. High reputation in the field of franchising allowed to attract more 60 % of franchisees who opened not one office, but two or more.
5. champion – a network of football clubs for young children. 261 franchise business and 80 own allow to reach a large audience of children aged from 3 before 7 years. Franchising is developing 2014 years and quite successfully.

All listed corporations allow franchisees to earn from 750,000 to 7,500,000 rubles per month .

7. Answers to newbie questions (FAQ)

Question 1. How to choose a franchise for a business?

The main criterion here is the amount that you are willing to spend on the acquisition. Here is a suggestion - count only on the amount who are willing to risk .

Having decided on the price category, select a few of the most attractive projects for yourself. Check out their franchising policy, affiliate management stakes and product line. All this information can be easily found in the public domain on the Web.

The most interesting options for investing money, which will quickly pay off the start-up costs and bring you profit, are:

1. sphere of media business;
2. organization of public catering;
3. trade and production of building materials.

Choose the option that is closest in spirit to be fully involved. It makes no sense to choose an activity that you are not interested in. You can discuss the nuances and communicate with consultants directly on the website of the company of interest.

Question 2. Is a franchise business suitable for beginners?

Small business franchises are one of the safest options conducting business activities.

The risk of failure is practically reduced to zero, because the business has already been debugged, the brand is promoted, and control is carried out by the franchisor.

Question 3. What makes up the cost of a franchise?

The cost of a concession is made up of several factors:

• brand awareness;
• the amount of royalty and lump-sum contribution;
• on the type of franchise (master franchise is always more expensive);
• from the appetites of the brand owner.

Important! The more famous the company, the more branches it has, the more expensive ⇑ the cost of the franchise will be.

Question 4. Are there franchises with minimal investment and is it possible to do without investment at all?

Despite the fact that a business with zero costs and high profitability is blue dream all entrepreneurs, in reality this can not be .

Even when buying a branch no lump sum you will have the following expenses:

1. rent and repair of premises;
2. payment of wages;
3. other organizational expenses.

Do not forget about royalty , which under the contract is usually 10 % from profit. Of course, the costs will pay off in the first couple of months of effective work, which is much faster than when building your own company.

8. Conclusion + video material on the topic

As you can see franchising This is a very attractive way to invest money. A beginner will be able to learn how to do business from experienced partners, while making a profit. For business pros, a franchise is attractive because of its quick payback.

On the pages of the site you will find a lot of useful information.

You will learn what a franchise is, what types of franchises are, and what are the main pros and cons of starting a franchise business

Hello dear friends! In touch Alexander Berezhnov, entrepreneur and founder of the HiterBober.ru website

Today we will talk about such a thing as a franchise.

Recently, the direction of franchising is gaining immense popularity, and in my opinion, it is completely justified.

Starting your own business through the purchase of a ready-made franchise gives aspiring entrepreneurs ample opportunities. But this method also carries some dangers.

All this will be discussed in today's article.

1. What is a franchise - we give a definition

The classic wording is as follows.

Franchise is a set of benefits that allows legal entities and individuals to use the brand, author's developments, and the franchisor's business model.

There is another definition of a franchise, I formulated it myself. It is more applicable to building a business in general.

Franchise- this is a paid right to open a business under the auspices of a well-known trademark (brand), using its rules, technologies, way of doing business.

This term can be described in different ways. In my definition, I conveyed the term "franchise" in simple terms. Let's see how this model works in practice.

In this material:

The concept of franchising

From a literal explanation, franchising is a type of preferential business. This is the name of one of the many forms of equal business relations and partnerships. With this connection, the franchisor and the small firm have equal rights of cooperation, sealed by an agreement.

More precisely explained, franchising is a kind of long-term business relationship of several companies, with a few notes:

• a well-known company sells the rights to a particular product to a franchisee;
• independent businesses capitalize on the popularity of the franchisor.

The whole essence of this system lies in the fact that a large company that has a good reputation among consumers concludes many contracts with small and, for the most part, independent firms. Thanks to this form of cooperation, independent entrepreneurs receive special rights to the product using a trademark already well known to consumers.

The names of the parent company and the name of the independent enterprise are clearly defined:

• franchisee is an independent firm (or entrepreneur) that acquires from the franchisor the right to study and assist in creating a business, while paying a certain fee for the operation of a well-known brand, know-how and additional systems provided directly by the franchisor;
• franchisor is a well-known company that has a widespread trademark and provides it for use by independent enterprises (entrepreneurs) for a fee, and, in addition to the brand name, provides additional systems and know-how.

In the case of small companies that have just been created and are not yet known, this form of cooperation is very useful and even convenient. Particular convenience is due to the fact that an independent company does not need to spend a lot of money on advertising, since the intended consumer will receive a product with a trademark familiar to him. Brand popularity and the number of possible consumers also play a significant role. Thus, the greater the fame, the more likely the franchisee will be quickly promoted.

It should be borne in mind that the amount of services provided for an independent company, of course, will be much lower than the cost of advertising and promoting your own trademark.

Franchising interactions

As a rule, a company that has a popular trademark (franchisor) does not form an association with a single small company (entrepreneur). Instead, the franchisor creates many contracts with many different, small enterprises (companies), thereby creating a whole network of its commodity, industrial offshoots. As a result, the franchisor forms small enterprises that are independent of the parent company and use the franchisor's trademark.

It should be noted that the contract includes full compliance with all the rules, which may include:

• the principle of trade;
• uniform (and other little things);
• product manufacturing.

While the franchisee, under the contract, follows the prescribed rules, the franchisor is obliged to provide all possible support to the independent enterprise (entrepreneur):

• provision of raw materials;
• delivery and supply of equipment;
• technology transfer;
• providing the necessary knowledge to all service personnel;
• additional services to assist in accounting.

The franchisee also has full rights to:

• operation of the trademark of the parent company;
• application of the style and design of the parent company;
• using the reputation of the parent company among other enterprises, which, to one degree or another, are equated to the franchisor.

A franchise is a variation of doing business that is provided by the franchisor to the franchisee at the time of the conclusion of the contract. Also, the franchise is called: franchising business package. This package usually includes:

• detailed manuals for the work;
• other, additional documentation that makes the transaction of enterprises equally equal.

In the vast majority of cases, the relationship between the parent company (franchisor) and an independent enterprise (franchisee) brings the same benefit to all parties.

Franchisees are required to strictly follow the prescribed rules.

1. Conduct business on halts set by the franchisor.
2. Fully comply with the franchise.
3. Take direct part in all events and promotions created by the franchisor.

As a result, the franchisor gives the franchisee everything he needs:

• attracting a mass of unique consumers;
• many new deals;
• increase in sales;
• high-quality advertising at no extra cost.

Thanks to the work done by the franchisor, the franchisee does not need to compete with other independent, and not only, enterprises. This is of great importance, because for the franchisee, without support, this would be a very big problem.

The franchisor, as the parent company, is obliged to provide the franchisee with all the necessary assistance in doing business, so that the independent enterprise is able to perform the operations required of it with a clear regularity.

Because of this form of cooperation, a small business gets the opportunity to conduct a licensed, independent business activity with the maximum use of the trademark of the franchisor and its customers.

Franchisors usually take on:

• advertising campaigns;
• delivery of products.

Under such a system, the franchisee of the contract under any circumstances remains an independent enterprise and undertakes to pay the agreed, under the contract, fee to the licensor for the provision of all services prescribed by the franchise. Franchisors cannot violate contracts, as this threatens with numerous penalties.

• legal demand for financial services (credit) from the franchisor;
• necessary equipment (with leasing conditions);
• training of employees (improvement of qualifications, additional consultation, etc.).

In a general sense, franchising is:

• business development of any kind with financing;
• a way to sell a variety of services and products.

Franchising is divided into several types:

• product franchising - large sales networks are organized, while the parent companies are responsible for advertising, know-how, spare parts and tools;
• franchising of services - numerous foreign companies work according to this principle: they rent premises, train employees in the necessary work skills, provide equipment required for production.

Features and notes of franchising

In an abbreviated explanation, franchising is a system of relationships that consists in the transfer by the franchisor (a company that is especially popular among consumers) to a franchisee (an independent company, without an established image) of a number of its products (marking and style).

The franchisor, at the same time, is obliged to provide full support to small businesses:

• provide technological assistance;
• and full consultation on any issues.

Sources of income of the parent company

The franchisor receives the main profit:

• from supplier discounts;
• from the initial contributions of an independent organization;
• from advertising fees of small companies;
• from premiums received after selection of premises and technologies for franchisees;
• from interest on loans provided to participants in cooperation.

In a general sense, franchising is the "leasing" of a trademark or commercial designation. The use of a franchise is governed by an agreement between the franchisor (the one who grants the franchise) and the franchisee (the one who receives it). The content of the agreement can be different, from simple to very complex, containing the smallest details of the use of a trademark. As a rule, the contract regulates the amount of deductions for the use of the franchise (it can be fixed, one-time for a certain period, constituting a percentage of sales). There may be no requirement for deductions, but in this case, the franchisee undertakes to buy a certain amount of goods/works/services from the franchisor.

Conditions for the use of a trademark/brand may serve as a separate clause of the contracts. These requirements can be very simple (for example, the franchisee has the right to use the brand in a particular industry) or rigid (for example, the franchisee undertakes to use the equipment in the store in strict accordance with the requirements of the franchisor - from the size and color of the shelves to the staff uniform).

• the franchisor receives royalties for the use of his trademark;
• the franchisee pays an initial fee for the right to become part of the system;
• The franchisor provides the franchisee with a business system.

The history of franchising

The prototype of the modern franchising system is considered to be the Singer sewing machine sales and service system. The founder of the world famous Singer Sewing machine company, Isaac Singer, became the founder of modern franchising. Beginning in 1851, the Singer firm entered into a written franchise agreement with distributors of goods, the agreement transferred the right to sell and repair sewing machines in a certain territory of the United States.

At the time of the organization of the world's first full-fledged franchise system, Singer's company ensured the mass production of sewing machines, which allows maintaining the most competitive prices, but at the same time did not have an established service system that would allow organizing maintenance and repair of machines throughout the United States. In this regard, a franchise system was created, which provided financially independent firms with exclusive rights to sell and service sewing machines in a certain territory. These early franchises were, at their core, operating distribution agreements with the additional obligation of the franchisee (dealer) to service the machines.

Modern franchising experienced a real upsurge when General Motors began to use franchised dealerships.

Classical commodity franchising, which distributes goods and services in the franchisor - franchisor system, began to change only in the 50s of the last century.

In Russia, franchising is beginning to become widespread only in recent years. In particular, most of the Pyaterochka grocery discounter chain, part of the Euroset communication stores, the 2GIS electronic reference card, 1C company operate under the franchise scheme.

Franchising under Russian law: commercial concession agreement

In Russian law, franchising relations are regulated commercial concession agreement.

Under a commercial concession agreement, one party (right holder) undertakes to grant the other party (user) for a fee for a period or without specifying a period of time the right to use in the user's business activities a set of exclusive rights belonging to the copyright holder, including the right to a trademark, service mark, as well as rights to other objects of exclusive rights provided for by the agreement, in particular for a commercial designation, a secret of production (know-how).

A commercial concession agreement provides for the use of a set of exclusive rights, business reputation and commercial experience of the right holder in a certain amount (in particular, with the establishment of a minimum and (or) maximum amount of use), with or without indicating the territory of use in relation to a certain area of ​​business activity (sale of goods received from the copyright holder or produced by the user, other trading activities, performance of work, provision of services).

Parties under a commercial concession agreement may be commercial organizations and citizens registered as individual entrepreneurs.

Benefits of franchising

Benefits for the franchisor

For the franchisor, the priority benefit of franchising lies in the fact that he receives, albeit a small, but guaranteed stable volume of sales of his products, since the franchisee is obliged to buy from him the consignments of goods, consumables or other products / services specified by the contract. If the income is stable, then it can be successfully planned for the future, which means that new directions can be developed.
With all this, the franchisor is not burdened with the difficulties associated with a number of expenses that ordinary players have - training and recruitment, quality control, etc. In addition, the development of a franchise network is an excellent brand advertisement that does not require special financial investments.

Benefits for franchisees

Using a proven business system

Before offering his franchise on the market, the franchisor must "bring to mind" his business system, work out all business processes and prove the effectiveness of his business. Moreover, for the effective development of the franchise network, the franchisor must have a flagship enterprise, on the basis of which the business is cloned. Therefore, when acquiring a franchise, an entrepreneur acquires an already proven and proven business model that has proven its effectiveness.

Opportunity to start your own business

Despite the fact that the franchisor has a certain degree of control over the franchisee, which is mainly aimed at improving the efficiency of partners by identifying possible problems of partner enterprises at the stage of their inception, the franchisee retains economic and legal independence.

Choice of industry

A potential franchisee has the opportunity to get acquainted with the franchisor's business before the stage of investing its own funds. This can be done on the basis of open information - the commercial offer of the franchisor and its operating enterprises, both own and partner.

Opportunity to reduce risks

By opening a partner enterprise, with a well-developed franchise program, the franchisee becomes part of the "family", that is, unlike the opening independent enterprise, the franchisor does not leave partners face to face with many problems and risks of a start-up business.

Successful market entry secured

One of the main requirements for a franchised business is the demand for goods or services provided by the franchisor. Therefore, when buying a successful business idea and starting its activities under an already well-known brand, the franchisee already has a circle of consumers loyal to the brand by the time they open their business.

Minimum advertising and marketing costs

Due to the fact that the franchisee begins to operate as part of a well-known network, his initial advertising costs are reduced to providing advertising for the opening of the franchise business in the local market. The same is the case with the current advertising, which is aimed at the "promotion" of the franchise network in this particular region.

Gaining access to the franchisor's knowledge base

The franchisor, providing partners with his business system, transfers not only a well-functioning mechanism, but also an “instruction” for its effective use. The franchisor teaches its partners how to effectively build a business, taking into account all its specific features.

Guaranteed Supply Chain

Since franchising, as a rule, is a priority activity for companies, and partners - franchisees - have the best conditions, the franchisor seeks to provide this area with the greatest resources, including delivery issues.

Franchising Disadvantages

• Franchisees are forced to follow the rules and restrictions set by the franchisor, even if they do not bring maximum benefit to the business.
• Franchisees are often required to purchase raw materials and products from suppliers designated by the franchisor, which may limit their access to the free market and force them to purchase raw materials and products at inflated prices.
• Franchisees may be subject to severe restrictions on exit from the business, including a ban on opening competing organizations for a certain period or in a certain territory.
• Franchisees rarely have influence over centralized marketing and advertising, but they may be forced to pay for centralized marketing and advertising campaigns. Thus, their funds may not be used in their best interests.

Notable franchise companies

There are many companies that provide turnkey business. At the same time, it should be noted that the name “franchisor company” does not mean that the company offers all its capacities for franchising, it can also have a certain number of objects in its “personal” property.

Notes

Sources

Growth strategy"

• Steven Spinelli Jr., Robert M. Rosenberg, Sue Burley Franchising = Franchising: Pathway to Wealth Creation. - M .: "Williams", 2006. - S. 384. - ISBN 0-13-009717-9

see also

Links

Civil law contracts
Transaction Invalidity of the transaction Agreement Offer Acceptance Quasi-contract
for the transfer of property into the property	purchase and sale (retail supply supply for state and municipal needs contracting energy supply sale of real estate sale of an enterprise) exchange of donation of rent (permanent life maintenance with a dependent) privatization of housing
for the transfer of property for use	lease (vehicles enterprise buildings and structures rental leasing) rental housing loans
for the performance of work	contract (domestic construction for the performance of design and survey work for the performance of work for state and municipal needs) participation in shared construction R&D
on the provision of services	actual paid provision of storage services transportation (chartering) of a transport expedition trust management of property legal agency commission orders financial